Abstract
The monetary union is an open economy with perfect capital mobility. It consists of two identical countries, say Germany and France. The targets of macroeconomic policy are price stability in the union and full employment in each of the union countries. The instruments of macroeconomic policy are monetary policy by the European Central Bank, fiscal policies by national governments, and wage restraint by national trade unions. The big questions are: What is the appropriate policy mix? And should policy actions be coordinated? A special feature of this paper is the numerical estimation of policy multipliers. The paper is organized as follows: the model, simple policies, mix of monetary and fiscal policy, mix of monetary policy and wage restraint, conclusion.KeywordsMonetary PolicyFiscal PolicyMoney DemandFull EmploymentPrice StabilityThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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